What is ZIRP, and how did it impact the startup world? [video]

For some of this, it shouldn't be private capital (such as infrastructure improvements) funding it, it should be public funds. The venture capital model is not a good fit for that, simply based on the evidence available, IE the distinct lack of funding for non-software solutions in the space.

SpaceX is a wonderful example of this as well. Elon Musk funded SpaceX, then investors followed much later, mostly due to StarLink and its potential, I imagine.

We need better government funding and we definitely need to re-evaulate how grants are structured, the funding tends to be very narrowly specified that you can't solve adjacent problems with the funding as it would be a violation of the terms of the grant. That sort of thing needs to be better accounted for and it isn't today, at least not always.

B2B SaaS has been around for years and genuinely solves a problem i.e. most companies struggle to run on-premise applications well.

The issue for me is far more Crypto and AI where ridiculous amounts of money has been spent with little to show for it.

I suspect it was really a matter of how VC sold itself in a ZIRP environment. They were "the yield guys" in an environment where there was no yield.

They could have advertised themselves as "we're making big long term investments in serious innovation that will maybe pay out in the distant future" and they probably could have raised money that way in an environment where money was basically free, but not as much. So instead we got "we're making the world a better place through paxos algorithms for consensus protocols."

I spent all of ZIRP while it was happening being bothered by this. It was insanity inducing to watch huge valuations and associated piles of money chasing the most banal and/or impossibly ridiculous ventures for YEARS.

I also used to tell many, many VCs to their face that the only reason they existed at all wasn't because they had any worthwhile insights into investing or innovation, but because tons of massive upstream capital & funds had a choice between definitely essentially losing money investing in bonds or probably losing money funneling it through their brokerage... er... venture fund. The world's least qualified kingmakers minting new American royalty, and we'll all be paying the price for it for decades.

To add insult to injury, now huge numbers of those alsoran VCs are pivoting into "deep tech" investing, and brining their inane-SaaS myopia and completely misaligned expectations along with them.

Why would there be bewilderment? Interest rates are, of course, the cost of money. We saw the cost of money fall to essentially nothing because the demand for money dropped off a cliff. As with anything, the price then fell to compensate. That's your basic supply and demand.

But why would the market no longer have a strong demand for money and see money as being essentially worthless? Because nobody knew what to do with it. That's why we got little out of ZIRP. ZIRP was merely a symptom of the populace not having a strong vision or direction in which to use resources. It was in reaction to the environment it took place in.

Had we had loftier goals and grander visions we'd have gotten more, but the cost would have also been much higher (i.e. ZIRP wouldn't have happened).

I don't know if I can say that I speak for MMT proponents generally but in his lecture on stabilising an unstable economy[1] Wray puts forward a series of very simple regulatory changes that would avoid those types of problems. In other words, regulatory oversight is a better tool for managing those types of bubbles than monetary policy.

Mosler also talks about interest rate policy in his debate with Murphy[2] and has a long career in finance in both a public and private capacity. I don't think you could say he hasn't paid enough attention to anything to do with interest rates!

[1] Lectures 6 & 7 in this series https://www.youtube.com/watch?v=SFf95BVx9Qw&list=PLYvSXI9SKG...

[2] https://www.youtube.com/watch?v=cUTLCDBONok&t=5347s

Japan had an asset bubble that monetarists blamed on their lack of action to tighten the money market by increasing interest rates.

Their economy tanked and they switched to ZIRP in the late 90s and have been there more or less ever since, with no runaway inflation or asset bubbles.

So at best you could say that the impact of monetary policy on inflation and GDP is indeterminate, however it is more likely than not going to be inflationary because increasing interest rates increases net financial assets in the private sector by increasing transfer payments to rich people.

When other countries export to the US, they send real goods and get USD denomiated reserves in accounts at the fed in return. They swap some of those USD denominated reserves for USD denominated bonds, because the US federal government has decided that they want to target specific interest rate and so they do so using domestic market operations.

At no point is the US federal government taking on debt denominated in a currency it does not issue (at least not in any significant amounts).

If you think LLMs are overhyped, you likely expect a bubble burst when the "Emperor has no clothes!" moment happens - so it's rational to avoid the risk of being stuck holding the bag when that happens.

Pure money stuff. He has said if you think something is over valued, short it. If you think the VC startup industry is overvalued the best way to do that is to start (and sell to VC) a startup. Enter adam neumann.

I think wrapper companies could do very well if AI does end up becoming having an impact near on the order of the internet or smartphones, which it may never.

A product that incorporates a foundation model could still require solving a hard engineering problem separately from the training and provision of said model. Someone who could, say, provide a reliable filter for copyrighted content from an LLM is providing real value and has a tangible moat.

Have often heard that YC picks the "best" founders and lets them work on whatever.

Which is interesting given that the last two batches had 90+% of founders being young and from SF.

So either international founders should quit running startups because they will never be great. Which is insulting.

Or YC is being a bit flexible with the truth and they do have a clear investment thesis.